Initial rulings in Chicago schools' funding lawsuit due April 28

CHICAGO (Reuters) - An Illinois judge said on Wednesday he will rule later this month on whether to temporarily halt how the state distributes funds for public schools after lawyers for Chicago's cash-strapped school system argued the current funding formula is racially discriminatory.

A lawsuit filed by the Chicago Public Schools (CPS) against the state of Illinois seeking to invalidate the state's school-funding system made its first appearance in a courtroom, where lawyers for the nation's third-largest school system sought a temporary injunction on the disbursement of any new education dollars throughout the state.

After presiding over a crowded hearing, Cook County Circuit Court Judge Franklin Valderrama indicated he will have a ruling on the city's injunction motion and on the state's bid to dismiss the case on April 28.

CPS, which faces deep financial problems, argues the existing formula violates Illinois' Civil Rights Act because the state does not underwrite costs for city teacher pension payments as it does for school systems elsewhere in the state.

"Our children are 20 percent of enrollment but receive only 15 percent of funding. That's a $500 million annual gap," CPS CEO Forrest Claypool told reporters after Wednesday's court hearing. "Our children are 90 percent of color. The rest of the state is predominantly white. The Illinois Civil Rights Act is clear, you cannot discriminate on the basis of race."

Pension payments that will jump to $733 million this fiscal year - up from $676 million last year - have drained reserves and been a factor in the system's general obligation credit ratings dropping deep into the junk category.

Lawyers representing the state argued that figuring how Illinois education dollars are distributed falls within the purview of state lawmakers and the governor, who have been locked in a nearly two-year budget stalemate.

They also said imposing a requirement that Chicago's school system receive a bigger slice of the funding pie with regard to teacher pensions would impose financial harm on districts outside the city that are not involved in the lawsuit.

"They're asking you to shut down the entire state education funding system," said Gary Caplan, an assistant attorney general representing the state.

The legal maneuvering by CPS follows several earlier failed attempts by others to reduce the state funding gap between property-wealthy school systems in Illinois and poorer counterparts with high concentrations of children from low-income families.